When health issues derail a person’s inability to work and earn income, they will often need to turn to long-term disability benefits to manage financially, if they are fortunate enough to have such coverage. Even with these benefits in place, the situation can necessitate a significant shift in lifestyle. In most cases, the insured person will need to make do with just a percentage of the income they were earning before their injury or illness.

However, if long-term disability coverage is denied, it can mean financial devastation for those who relied on the injured person’s salary for their day-to-day expenses, including mortgage or rent payments, groceries, and utility bills.

Coverage denial creates a highly distressing situation for the insured and their family. They must now deal with trying to compel payment from their insurance company in addition to managing the injury or illness that prompted the application for benefits in the first place. This is likely what an Ontario jury had in mind this June when it returned a decision awarding one of the highest-ever punitive damages awards in a Canadian civil case after the plaintiff had her benefits terminated three years after suffering a stroke.

What Are Punitive Damages?

In a civil case, the plaintiff is most commonly seeking what is known as compensatory damages. These damages are intended to compensate the plaintiff for the losses they have suffered due to the defendant’s actions.

For example, take a case for breach of contract between a supplier of goods (Company A) and another business (Company B), where the contract said that Company A would supply Company B with a certain number of goods at a specific price by a particular date. If Company A failed to provide the goods, forcing Company B to buy them elsewhere at a higher price, Company B might claim the difference in price, plus any other costs related to the delay. These are an example of compensatory damages.

However, in some cases, the plaintiff will seek additional damages if the defendant’s actions were particularly egregious. Punitive damages are awarded when the defendant’s conduct is so high-handed that it requires a penalty aimed at punishment and/or deterrence. As stated in an article by Donna Lea Hawley published by the Alberta Law Review Society, punitive damages are “not necessarily based on the principle of compensating the victim, but [are] based as a reaction to the conduct of the wrongdoer”.

Plaintiff Denied Ongoing Coverage After Stroke

In the still-unpublished decision of Baker v. Blue Cross, the plaintiff, Sara Baker, was employed as a Director at a hospital when she suffered a stroke/brain bleed in 2013, rendering her unable to work. She had been paying long-term disability premiums through her place of employment to the insurer, Blue Cross, since 2002. After her injury, she could not return to her job and began collecting long-term disability benefits.

In 2016, the insurer determined that Baker should be able to return to employment in an occupation that would pay her at least 60% of her former salary and terminated her benefits. This finding directly contradicted medical evidence provided by Baker’s doctors, which stated that she continued to experience symptoms which made it impossible for her to work, including headaches, cognitive impairment, and fatigue.

Plaintiff Sued Blue Cross, Was Subject of Hundreds of Hours of Surveillance

Baker brought a claim against her insurer for reinstatement of her benefits in 2019, but the trial had to be rescheduled three times due to scheduling challenges presented by the COVID-19 pandemic. One of those challenges was that jury trials were temporarily suspended due to safety concerns. In this case, the insurer specifically requested a jury trial over a judge-only trial. Baker filed a motion to strike the jury notice and proceed by way of a judge-only trial to move the litigation forward, but the motions judge found she had failed to demonstrate that the parties would be better served by dismissing notice to the jury.

After hearing the case, which included evidence that the insurance company had engaged in nearly 400 hours of covert surveillance of the plaintiff, the jury returned a verdict in the plaintiff’s favour. The award ordered the insurance company to reinstate Baker’s long-term disability benefits, pay her $40,000 for mental distress, and pay $1.5 million in punitive damages.

Highest Award for Punitive Damages Since Supreme Court Decision in 2002

This case marks the highest civil award for punitive damages in Canada since the 2002 Supreme Court of Canada decision in Whiten v. Pilot Insurance Co. In that case, which was also related to a denial of insurance coverage, the plaintiff had suffered a devastating house fire that destroyed her home. The insurance company provided a single payment of $5,000 and two months’ rent on a modest cabin the plaintiff and her family had rented nearby before refusing any further payment. The insurer alleged that the family had purposefully set the fire, despite contrary opinions from the fire chief and the insurer’s own expert that there had been no evidence of arson.

The jury in the original trial awarded the plaintiff $1 million in punitive damages, later reduced to $100,000 by the Ontario Court of Appeal. However, the Supreme Court of Canada reinstated the original award. The Supreme Court acknowledged the award was on the high end of the allowable range but stated:

“The jury decided a powerful message of denunciation, retribution and deterrence had to be sent to the respondent and they sent it.  The obligation of good faith dealing means that the appellant’s peace of mind should have been the respondent’s objective, and her vulnerability ought not to have been aggravated as a negotiating tactic.”

Contact Milosevic & Associates For Exceptional Legal Representation in Insurance Disputes

The highly experienced Toronto insurance lawyers at Milosevic & Associates represent clients with insurance-related legal issues, including the denial of long-term disability benefits.  We understand the importance of swift, resourceful action where insurance matters are involved. We can act quickly to protect our clients and help them receive maximum compensation for their injuries or harm suffered. To learn more about how we can help you call us at 416-916-1387 or contact us online.